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Even Under Obamacare, Medical Bankruptcies Can Still Happen to New Yorkers

The Affordable Care Act (ACA, or “Obamacare”) is transforming the landscape in healthcare, broadly expanding the total number of people who can afford or access health insurance. This is expected to have the effect of improving disease and injury management overall, saving lives while reducing costs to the system.

In fact, health insurance is described by many as household financial insurance. The Institute of Medicine (part of the National Academy of Sciences, a nongovernmental nonprofit) reported on the severe effect health costs can have on families’ financial and physical well-being in “Health Insurance Is a Family Matter” (2002). While written more than a decade ago, the report is still relevant. Consider some of the known factors of health costs in the United States today:

About 80 percent of people who file for bankruptcy as a result of medical bills have medical insurance. Keep in mind that the 20 percent copay still leaves the patient paying for 20 percent of the full cost. When bills climb into six and seven figures, it can still be a huge financial burden.

You can negotiate a lower bill, but only before it goes to collections. Some doctors and hospitals may negotiate costs.

Medical debt is in the category of unsecured debt, meaning the medical provider cannot take a valuable asset from you, such as your home or car. But in a Chapter 7 bankruptcy (liquidation), proceeds from the sale of assets are divided among your creditors. Chapter 7 bankruptcy in New York allows some property to be held by the filer, such as $75,000 or greater of a home’s value. In other words, you can still lose your home to medical debts.

With more people now covered by medical insurance, there should be fewer medical bankruptcies. But in the event a medical or other catastrophe overwhelms your ability to pay bills, it is wise to discuss your options with a New York bankruptcy attorney.

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